Venezuela has for years experienced one of the worst inflation rates in the world, complicating cash transactions amid the economic crisis.
Venezuela will debut with a new currency that will have six zeros less, a response to the years of some worst inflation.
The highest denomination of the Venezuelan bolivar had previously been a one million bolivar bill, which is currently worth just under $ 0.25. That will now become a one bolivar bill.
Introduced on Friday, the highest denomination for the new currency will be 100 bolivars, with a value of just under $ 25.
In announcing the currency exchange in September, the central bank of Venezuela said that the bolivar “will not be worth more or less; it is just to facilitate its use on a simpler monetary scale ”.
The change is intended to simplify cash transactions and accounting, which are often complicated by a series of unwieldy zeros. Inflation had led banks to limit the amount of cash that people could withdraw in a day and had forced many of the country’s residents to use US dollars or electronic payment methods.
It comes when the gross domestic product or GDP of Venezuela has collapsed by 80 percent since 2013 as the price of oil plummeted and production declined during decades of underinvestment and government mismanagement.
The bolivar has lost almost all of its value in just over 10 years, losing almost 73 percent in 2021 alone.
While Venezuela’s central bank no longer publishes inflation statistics, the International Monetary Fund estimates that the country’s rate by the end of 2021 will be 5,500 percent.
Until Friday, seven million bolivar bills, the highest denomination and very difficult to obtain, had to pay in cash for a loaf of bread.
‘We made … less than $ 3’
Three out of every four Venezuelans currently live in extreme poverty, according to the National Survey of Living Conditions 2020-2021, carried out by researchers from the Andrés Bello Catholic University, with the economic collapse aggravated by the coronavirus pandemic.
Despite receiving a salary of millions of bolivars, the money is worth almost nothing, said teacher Marelys Guerrero.
“We earn less than $ 3 every fortnight,” the 43-year-old told AFP news agency in the capital, Caracas.
Friday’s change marks the third time that Venezuela’s socialist leaders cut zeros from the currency.
The bolivar lost three zeros in 2008 under the late President Hugo Chávez. His successor, current President Nicolás Maduro, removed five zeros in 2018.
Banks said they would freeze trading for several hours between Thursday and Friday to make adjustments to the exchange rate.